The fall was mainly due to Chinese stock exchanges crashing tracking manufacturing data and a sharp decline in the yuan exchange rate.

Tata Motors, Adani Ports, Bharti Airtel, HDFC, State Bank of India, ICICI Bank and Lupin were the main Sensex losers.

Some of the scrips, such as SBI, ICICI Bank and Axis Bank touched a new 52-week low on Monday.

Wipro elevated two of its top-level executives on Monday; Abidali Z Neemuchwala, current group president and COO, will be the new CEO, while T K Kurien, current CEO, has been elevated to the post of executive vice chairman, the company said in a regulatory filing.

Earlier, the markets corrected sharply on Monday tracking Chinese stock markets that plunged by more than 4%, with the Sensex losing 4% at 12.10 pm.

The Sensex was trading at 25,761, down 399 points, or 4.86%, while the Nifty was trading at 7,837, a loss of 125 points, or 1.57%.

The benchmark Shanghai Composite Index dropped over 4%, while the the smaller Shenzhen index declined 5.22% in the morning, said IANS, referring to a Xinhua report.

Another media report said that falling a a 7% fall, trading on the Shanghai and Shenzhen stock exchanges was halted on Monday, marking the first such instance when the country's new "circuit breaker" was invoked to curb market volatility.

lt was the first China's new "circuit breaker" intervened to curb market volatility.

The drop in the CSI300 index, which covers both bourses, for the first time triggered an automatic early closure under the new system, after an initial 15-minute trading halt failed to stem the declines.

IRB Infra gained about 4.8% on news that the company has won a Rs 10,000 crore National Highway project to construct and operate the 14.8 km tunnel Zozila tunnel in Jammu & Kashmir. It is reported as the biggest NH project awarded in India from a project cost point of view.

The second trading day of CY 2016 for India was in any case, likely to begin on a sombre note in the wake of the Pathankot terror attack on Saturday, which continued till Sunday, in which at least five terrorists have been killed while six Indian Air Force (IAF) men and an NSG commando have lost their lives.

The operations continued into Sunday evening, according to Union Home Secretary Rajiv Mehrishi, who briefed mediaperons at around 5 pm on Sunday in New Delhi.

The audacious attack on the IAF base in Pathankot, Punjab, suspected to have been carried out by Pakistan-based terror outfit Jaish-e-Mohammed, could well impact trading on Monday on the BSE and NSE, which gained on two consecutive days — 31 December, 2015 and 1 January, 2016.

The optimism expressed by Union Finance Minister Arun Jaitley that the Goods and Services Tax (GST) Bill could be passed in the Budget Session of Parliament may not have much of an impact when markets open on Monday, 4 January, 2016.

The government raised excise duty on petrol and diesel on 2 January, 2016, the third in this financial year. The three hikes are expected to yield about Rs 10,000 crore to the NDA government this fiscal, but it needs to be seen if it would be taken positively by the markets in the context of disinvestment proceeds likely to fall short of the budgeted Rs 69,500 crore for the current fiscal.

The markets had made a modest gain on Friday, with the Sensex gaining 43 points and the Nifty 17 points.

The earnings season begins this fortnight, with Infosys, the Bengaluru-based IT software services company, declaring its third-quarter results on 14 January, 2016, followed by Pipavav Defence and Offshore Engineering on 15 January.